Receiving Wide Coverage ...
Forecasting the Fed: The Federal Reserve plans to wrap up its bond-buying program this year, but it may continue reinvesting the proceeds from maturing securities to hang onto its portfolio of Treasuries and mortgage bonds, according to Binyamin Applebaum at the New York Times. Applebaum's analysis is generally supportive of the idea, noting that maintaining reinvestments "could also help keep borrowing costs low" and could also reassure a jittery market looking for signs as to when the Fed will raise interest rates. Harvard political economy professor Benjamin Friedman argues in the Financial Times the Fed should hang onto an "ample supply" of bonds rather than attempt to return its balance sheet to a pre-crisis normal. "Buying or selling bonds gives the Fed a way of influencing longer-term interest rates in general, and mortgage rates in particular," Friedman writes. "This lever will remain useful long after short-term rates begin to rise."
A Blow for Patent Trolls: The U.S. Supreme Court has ruled that abstract business ideas are ineligible for patent protection in a case that involved a method for reducing risk in foreign exchange transactions. The unanimous ruling in favor of CLS Bank, a clearing house for foreign exchange, is "in line with earlier decisions of the court that were wary of stifling innovation," according to the Times. Abstract software patents pedaled by so-called "patent trolls" are a growing problem for the tech industry, according to the Wall Street Journal. Now "companies can't simply stick an abstract idea into a computer and claim a software patent for it," Brent Kendall writes. The FT takes a look at the ramifications of the ruling, noting that the decision "brought a wave of relief in the software and financial services worlds."
Wall Street Journal
Fed Chair Janet Yellen isn't worried about overleveraging right now, but Richard Barley of "Heard on the Street" says there's still a danger posed by risky securities. "Investors should take care not to become overleveraged as they hunt for yield," he writes.
The Justice Department has received the green light from a North Carolina judge to go ahead with a lawsuit against Bank of America. The lawsuit alleges "that Bank of America misled investors about the quality of about $850 million in mortgage-backed securities that it sold to investors in 2008." Bank of America had tried to get the lawsuit tossed, arguing that the investors should have known what they were getting into and that the quality of the securities could have been worse.
"Some of the banks that received TARP money aren't obligated to make good on dividend payments they have missed," the Journal reports. "That leaves the banks with a dilemma of either fulfilling their obligations to taxpayers at the expense of their own balance sheets, or keeping the money for themselves." Guess which option the banks find more appealing?
Private-equity firm KKR is injecting First Data, the credit-card processor it took over in 2007, with $1.2 billion. The eyebrow-raising move shows the "debt-fueled takeover of the payment processor seven years ago remains a burden for the buyout firm," according to the Journal.
The probe into a suspected metal-backed loan scam in China may cause a drop-off in the country's imports of copper and iron ore, according to the paper.
Deutsche Bank has been ordered by German regulator BaFin to improve its internal controls over how commodity prices are reported.
The New York Fed has become a major player in the repo market, a signal the central bank "is testing new ways to control short-term interest rates once it starts tightening monetary policy."
Credit card companies including American Express, Capital One and Discover reported an upswing in their domestic card businesses in May. The FT suggests this could mean consumer spending is finally taking off.
GE Capital Retail Bank has been ordered to pay $169 million to 108,000 Hispanic cardholders in a settlement with the Justice Department and the Consumer Financial Protection Bureau. The bank allegedly failed to extend Spanish-speaking customers the same opportunity to enroll in debt-reduction programs it offered other cardholders between 2009 and 2012.
Wonkblog takes a look at a man who earns $100,000 a year but can't open a bank account because his name is listed in ChexSystems, "a little-known database that tracks financial transgressions."